Another bank and a multilateral institution have further downgraded their 2020 economic outlook for the Philippines after the government reverted 50 percent of the economy to stricter lockdown this month despite improving conditions when quarantine restrictions were eased.
In a note to clients, Metrobank Research said it now expected gross domestic product (GDP) to shrink by 6.8 percent for the entire year, a deeper recession than the government’s updated projection of 4.4-6.6 percent, or an average of 5.5-percent full-year decline after first-half GDP fell by an average of 9 percent.
“While the second-quarter GDP contraction was deeper than expected, the worst could have been over for the domestic economy as the contractions likely bottomed out in the second quarter,” Metrobank research analyst Pauline Revillas said, referring to the record 16.5-percent year-on-year GDP drop during the April-to-June period—at the height of the longest and most stringent COVID-19 lockdown in the region that put a halt to 75 percent of economic activities.
“Some developments—such as pickup in external trade numbers and manufacturing production—point to a start in economic activities, albeit likely small, amid the gradual reopening of the economy towards the end of the second quarter,” Revillas said, referring to the less-restrictive general community quarantine imposed in most parts of the country since June, which resumed three-fourths of the economy.
“A sustained robust government spending should continue supporting the economy as household spending and investment spending are still expected to remain sluggish. The surge-and-clampdown cycle is seen to continue this year, thus, it is essential during this time of economic hardship that the government resumes its ‘Build, Build, Build’ projects [to also help support consumption spending] and that a sector-targeted fiscal stimulus program be approved to help restore consumer and business confidence. The revived consumer confidence would help get the Philippines out of the doldrums as the economy is mainly consumption-led,” Revillas said.
In an Aug. 11 report, the United Nations Economic and Social Commission for Asia and the Pacific (Unescap) said it expected the Philippines’ GDP to slide by 7 percent this year, based on forecasts as of July 31, before rebounding with 7-percent growth next year.
In a statement on Wednesday, Finance Secretary Carlos Dominguez III noted that based on meetings with industry leaders during the third week of July, “the economy actually is already beginning to recover.”
“Our estimate is that we hit already the lowest parts of the economy, which was in April and May. These were the lowest points,” Dominguez told President Duterte during the July 31 meeting of the Inter-Agency Task Force for the Management of Emerging Infectious Diseases.
However, Metro Manila as well as the provinces of Bulacan, Cavite, Laguna and Rizal were placed under more stringent modified enhanced community quarantine on Aug. 4-18 after medical front-liners sought a “time-out” from a surge in COVID-19 cases when the economy was reopened.
For Dominguez, “the Philippines’ low inflation rate, ample liquidity in the economy and stable peso, which is currently one of the strongest in Asia, have placed the country in good shape to overcome the COVID-19 crisis.”
Moving forward, Dominguez said “we have to encourage people also to start spending so that the economy can start picking up.” —Ben O. de Vera